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Research Report

28/11/2019 14:27

Mengniu's credit quality unaffected by acquisition of LDD

[ET Net News Agency, 28 November 2019] Moody's Investors Service said in a new report
that China Mengniu Dairy Company Limited's (02319)(Mengniu, Baa1 stable) proposed
acquisition of Australia-based Lion Dairy & Drinks Pty Limited will not have an immediate
impact on its credit quality.
"We expect the transaction will create operational synergies with Mengniu's existing
businesses, further expand its geographical coverage through Lion Dairy's presence in
Australia and Southeast Asia, and provide it with access to low-cost raw milk supplies,"
said Ying Wang, a Moody's Vice President and Senior Analyst.
"Mengniu should be able to absorb the acquisition within its credit profile. Assuming it
funds 30% of the AUD600 million (RMB2.9 billion) consideration with debt, its leverage
would stay at around 2.5x in 2020, which remains appropriate for its rating," added Wang.
The acquisition follows Mengniu's announcement in September that it will acquire
Bellamy's Australia Limited, another Australian-based dairy company.
Both acquisitions align with Mengniu's strategic plan to grow its international presence
and optimize its product mix, the credit rating agency said.
Mengniu's cash balance, including its cash on hand and short-term invested deposits,
remained strong at RMB19.7 billion as of June 2019, providing it with a further buffer in
case of any business integration issues. (KL)

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